Dave Ramsey Baby Step 5 Explained

Baby Step 5: Save for Your Children’s College Fund

This step is one that I can say that I did not do, because we got started on the Dave Ramsey steps too late in life. Depending on your particular age and situation, you have to make your own choices here. Maybe you have to skip this step to save for retirement for yourself.

Perhaps your particular child/children are not geared for college. Depending on what their individual giftings are, their goals may be met better another way. 

And, if they are going for a degree, make sure it's a degree that will get them into the field/profession that they want to be in. I know so many people who have gotten degrees and they don't use them in the field they work in. They went back and had more education to qualify in their field of interest.

 Avoiding student loan debts can be one of the biggest factors in staying out of debt as a young adult. If you can pay for your kid's college tuition then you'll ensure their financial security in the future, as they'll better be able to stay out of debt. 

Dave Ramsey recommends using either a 529 college savings plan or an education savings account (ESA). Talk to your bank or credit union about setting up these accounts for these specific purposes. 

If you’re saving for college, Ramsey advises, “as much as possible” use Educational Savings Accounts (ESAs) and 529 tax-advantaged savings plans known as qualified tuition plans.

“Never use insurance, savings bonds, or pre-paid tuition.”

And he says: Pay cash. No college loans.

Also, there is absolutely nothing wrong with your kids saving up for their own college if you cannot. They can work and save ahead of time, and work during their college educational years.

Dave Ramsey